S 400 Session 109 (1991-1992)
S 0400 General Bill, By Saleeby, Land, McConnell, M.F. Mullinax and T.H. Pope
A Bill to amend Section 38-5-120, Code of Laws of South Carolina, 1976,
relating to the revocation and suspension of insurance certificates of
authority, so as to provide standards for determining hazardous insurance
proceedings and to authorize the Chief Insurance Commissioner to take action
when an insurer is in an unsound condition or in a hazardous condition.
01/09/91 Senate Introduced and read first time SJ-12
01/09/91 Senate Referred to Committee on Banking and Insurance SJ-1
A BILL
TO AMEND SECTION 38-5-120, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO THE REVOCATION AND
SUSPENSION OF INSURANCE CERTIFICATES OF AUTHORITY,
SO AS TO PROVIDE STANDARDS FOR DETERMINING
HAZARDOUS INSURANCE PROCEEDINGS AND TO AUTHORIZE
THE CHIEF INSURANCE COMMISSIONER TO TAKE ACTION
WHEN AN INSURER IS IN AN UNSOUND OR A HAZARDOUS
CONDITION.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-5-120 of the 1976 Code is amended to read:
"Section 38-5-120. If the (A) The
commissioner shall revoke or suspend certificates of authority
granted to an insurer and its officers and agents if he is of the
opinion upon examination or other evidence that one or more of the
following exist:
(a) an (1) The insurer is in an unsound
condition, or.
(b) an (2) The insurer has failed
to comply not complied with the law or with the provisions
of its charter, or.
(c) the (3) The insurer's condition is
such as to render renders its proceedings hazardous to the
public or its policyholders, or. For the purpose of
the application of this item, one or more of the following standards may
be considered by the commission in determining whether the continued
operation of an insurer transacting insurance business in this State is
hazardous to the public or its policyholders:
(a) adverse findings reported in financial condition and market
conduct examination reports;
(b) the National Association of Insurance Commissioners
Insurance Regulatory Information System and its related reports;
(c) the ratios of commission expense, general insurance
expense, policy benefits, and reserve increases as to annual premium and
net investment income which could lead to an impairment of capital and
surplus;
(d) whether the insurer's asset portfolio when viewed in
light of current economic conditions is not of sufficient value, liquidity,
or diversity to assure the company's ability to meet its outstanding
obligations as they mature;
(e) whether the ability of an assuming reinsurer to perform and
the insurer's reinsurance program provides sufficient protection for the
company's remaining surplus after taking into account the insurer's cash
flow and the classes of business written as well as the financial condition
of the assuming reinsurer;
(f) whether the insurer's operating loss in the last twelve
months or a shorter time including, but not limited to, net capital gain or
loss, change in non-admitted assets, and cash dividends paid to
shareholders, is greater than fifty percent of the insurer's remaining
surplus as regards policyholders in excess of the minimum required;
(g) whether an affiliate, a subsidiary, or a reinsurer is
insolvent, threatened with insolvency, or delinquent in payment of its
monetary or other obligations;
(h) contingent liabilities, pledges or guaranties which
individually or collectively involve a total amount which in the opinion
of the commissioner may affect the solvency of the insurer;
(i) whether a `controlling person' of an insurer is delinquent
in the transmitting to or payment of net premiums to the insurer;
(j) the age and collectibility of receivables;
(k) whether the management of an insurer, including
officers, directors, or other persons who directly or indirectly controls
the operation of the insurer, fails to possess and demonstrate the
competence, fitness, and reputation necessary to serve the insurer in that
position;
(l) whether management of an insurer has failed to respond to
inquiries relative to the condition of the insurer or has furnished false
and misleading information concerning an inquiry;
(m) whether management of an insurer has filed a false or
misleading sworn financial statement, released a false or misleading
financial statement to lending institutions or to the general public, made
a false or misleading entry, or omitted an entry of a material amount in
the books of the insurer;
(n) whether the insurer has grown so rapidly and to an
extent that it lacks adequate financial and administrative capacity to
meet its obligations in a timely manner;
(o) whether the company has experienced or will
experience in the foreseeable future cash flow or liquidity problems.
(d) the (4) The true value of the
insurer's assets, if it is a life insurer, is less than its liabilities, exclusive
of its capital, or.
(e) the (5) The officers or agents of
an insurer refuse to submit to examination or to perform any
a legal obligation relative to an examination,
or.
(f) an (6) The insurer has failed
to comply not complied with a lawful order of the
commissioner, the Commissioner shall revoke or suspend all
certificates of authority granted to the insurer, its officers, or agents and
shall cause notice thereof to be.
(B) Notice of revocation and suspension must be published
in a newspaper of general circulation in this State. No new business may
be done thereafter by the insurer or its agents in this State while
the default or disability continues nor until its authority to transact
business is restored by the commissioner.
(C) Notwithstanding the provisions of subsection (A)(6), if the
commissioner determines that an insurer is in an unsound condition or
in a hazardous condition provided in subsection (A)(1) and (3), he may
issue an order requiring the insurer to:
(1) reduce the total amount of present and potential liability
for policy benefits by reinsurance;
(2) reduce, suspend, or limit the volume of business being
accepted or renewed;
(3) reduce general insurance and commission expenses by
specified methods;
(4) increase the insurer's capital and surplus;
(5) suspend or limit the declaration and payment of dividends
by an insurer to its stockholders or to its policyholders;
(6) file reports in a form acceptable to the commissioner
concerning the market value of an insurer's assets;
(7) limit or withdraw from certain investments or discontinue
certain investment practices to the extent the commissioner considers
necessary;
(8) document the adequacy of premium rates in relation to the
risks insured;
(9) file, in addition to regular annual statements, interim
financial reports on the form adopted by the National Association of
Insurance Commissioners or on a format approved by the commissioner;
(10) disregard credit or an amount receivable resulting from
transactions with a reinsurer which is insolvent, impaired, or otherwise
subject to a delinquency proceeding;
(11) make appropriate adjustments to asset values attributable
to investments in or transactions with parents, subsidiaries, or affiliates;
(12) refuse to recognize the stated value of accounts receivable
if the ability to collect receivables is highly speculative in view of the
age of the account or the financial condition of the debtor; or
(13) increase the insurer's liability in an amount equal to
contingent liability, pledge, or guarantee not otherwise included if there
is a substantial risk that the insurer will be called upon to meet the
obligation undertaken within the next twelve months."
SECTION 2. This act takes effect upon approval by the Governor.
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